Thoughts on the Tom Clancy estate tax allocation litigation

“This Court is charged with the task of determining the estate tax liability of one of the testamentary trusts created by the Last Will and Testament of renowned author and beloved resident of Baltimore City, Thomas L. Clancy, Jr.” Judge Lewyn Scott Garrett, Orphans’ Court, Baltimore, MD

Baltimore City Orphans’ Court Judge Lewyn Scott Garrett entered this 47-page order ruling that the late author’s estate taxes must be paid exclusively from the trust going to the four adult children of his first marriage, exempting the share going to his second wife and their child from paying any estate tax. The economic implications of this ruling are huge, as reported here by Law360:

Tom Clancy’s widow is not responsible for a multi-million dollar tax bill on the best-selling author’s $83 million estate, which includes a minority share of the Baltimore Orioles, a 535-acre Maryland estate, and a rare World War II tank, a Maryland probate court judge ruled on Friday. Baltimore City Orphans’ Court Judge Lewyn Scott Garrett concluded Friday that none of Alexandra Clancy’s two-thirds share of the $83 million family estate can be used to foot the hefty $11.8 million tax bill. Instead, the taxes must be paid out of the roughly $28.5 million trust Clancy left to his four adult children from his first marriage, the judge said.

A working lawyer’s perspective:

As a person who litigates these kinds of cases for a living, what I found most interesting about the order was how close the call was. This wasn’t a slam dunk. It could have gone either way. At the center of this controversy are the convoluted estate-tax allocation provisions incorporated into Clancy’s will, which Judge Garrett charitably describes as “inartfully drafted.”

Sloppy drafting = heightened litigation uncertainty. Why? Because this kind of drafting often leaves room for more than one “plausible” interpretation that also makes sense and seems fair. That’s what happened in this case.

Under the interpretation advocated by Clancy’s second wife, the court was asked to interpret Clancy’s will in a way that reduced his overall tax bill, but resulted in 3/4 of the net after-tax estate set aside for family members going to Mrs. Clancy and her child, and only 1/4 going to Clancy’s children from his first marriage. Under the interpretation advocated by Clancy’s older children, the tax bill would be higher, but the estate would have been split in three equal shares: 1/3 for surviving spouse, 1/3 for her child, and 1/3 for children of first marriage. So what did Clancy want (i.e., what’s his “overriding intent”)? Less taxes or an even split? Both interpretations make sense and seem fair. And according to Judge Garrett, both are “plausible,” as he repeatedly states in his order:

Respondent’s construction of the plain language of the Will is certainly plausible . . .

* * *

Certainly, both constructions are plausible.

* * *

Respondent’s construction is certainly plausible . . .

Good lawyering = better judging:

When it’s a close call and the stakes are high, the premium on good lawyering goes up exponentially. Why? Because it’s in these kinds of cases that a state court judge is going to rely most heavily on the lawyers giving him or her the “ammunition” needed to do a good job (i.e., thorough, well-written legal briefs and a clear factual record). If you read Judge Garrett’s 47-page order, it’s clear he was the beneficiary of excellent lawyering.

First, the order contains a detailed quantitative analysis of the tax/economic implications of the competing interpretations (who says lawyers can’t do math!). Then, the order wades through Maryland’s estate-tax apportionment statute. These statutes are notoriously complex and difficult to decipher (as I recently noted here in connection with amendments to F.S. 733.817, Florida’s equivalent apportionment statute). Finally, the order applies a three-pronged analysis to deconstruct the key text of Clancy’s will, starting with its “plain language,” then applying an exhaustive analysis of interpretive case law, and concluding with a thoughtfully reasoned determination of Clancy’s “overriding intent.”

For those of us in the trenches, this kind of judicial work product is gold, and certainly worth holding onto for future reference. I’m assuming this order’s going to be appealed. If it is, it’ll be interesting to see how much of it gets folded into the appellate court’s opinion. Stay tuned for more . . .

About the Author

Juan C. Antúnez is a partner with Stokes McMillan Antúnez P.A., a boutique trusts and estates law firm located in Miami, Florida. Trusts and estates litigation, probate administration and estate planning is all he does as a lawyer.
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